KAMPALA: The Ugandan shilling inched lower against the dollar on Friday, weighed down by greenback demand from commercial banks and foreign investors exiting Uganda's Treasury securities on the back of a drop in yields.
At 0846 GMT commercial banks in Kampala quoted the shilling at 2,483/2,493, weaker than Thursday's close of 2,478/2,488.
"The shilling is being pressed by a combination of both demand in the interbank market and foreign investors exiting as their debt matures," said Faisal Bukenya, head of market making at Barclays Bank Uganda.
"The low yields are deterring would be new investors while also making those with maturities head for the exit instead of re-investing."
Rates across the maturity curve of Uganda's debt have declined significantly over the last few months, mirroring the central bank's monetary policy easing cycle.
At the last government bond auction on Aug 8, the weighted average yield on the benchmark 91-day Treasury bill hit a new low to 14.4 percent, down from this year's high of 23.4 percent in January.
Analysts say yields are set to fall further in the coming months as the central bank continues to loosen its policy rate to re-invigorate sagging economic growth.
This month the bank cut the rate to 17 percent from July's 19 percent after a sharp fall in the country's inflation, which declined to 14.3 percent in July from 18.0 percent in June.
"I think the shilling will hold steady next week though with a risk of a marginal depreciation mainly from a possible surge in interbank demand," said Sophie Achak, chief dealer at Stanbic Bank.
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